If the bounce in Armand Linkens' step is any indication, happiness and maybe even riches are achievable in the smart card business.

Mr. Linkens, managing director of Proton World International, has been jauntily defying an old joke about how nobody ever made money on the advanced plastic cards. This is an only slightly exaggerated idea rooted in North America's reluctance to adopt cards with computer chips on them because there appears to be no cost-justification.

But Proton, the Belgian electronic purse program that was the first based on Proton World's technology, is profitable, Mr. Linkens declared. One element of its success is that after 73 million small-value purchases worth $326 million in almost four years of operation through Sept. 30, the participating banks have accumulated $41 million in unspent float.

Banksys, the banking services company for which Mr. Linkens started and managed Proton, expects to reap further rewards. The system set a monthly transaction record in October, with 4.2 million. It consists of seven million cards that can have cash value loaded in 74,000 devices, most of them telephones, and that can be used at 112,000 shops and unattended points of purchase.

Belgium represents only a small fraction of what Proton can become worldwide, where more than 30 million cards have logged 109 million transactions in 258,000 terminals. Banksys spun off Proton World last year and now shares ownership with American Express Co., Visa International, the Australian systems company ERG Ltd., and Interpay, an entity similar to Banksys in the Netherlands, which is one of 18 countries where the purse technology has been licensed.

The Interpay program, Chipknip, has 14 million cards in circulation and will soon be consolidating its back-office operation with that of a competing network, Chipper. In Mexico, joining a list of seven or eight major nationwide deployments of Proton, 60 million cards are projected starting next year, with access to 300,000 public telephones.

Brussels-based Proton thus has the biggest multinational footprint in the business. Its staff has doubled, to 130, in the past year.

On top of that come innovations in multiple applications on the card, remote payments by wireless phone and other card-reading appliances, and interoperable technical standards - all giving Mr. Linkens a solid and well-capitalized platform to preach from.

"This is all about changing infrastructure," he said in a recent interview. "The existing infrastructure has done what it can do for us. It has to change, and the change will have to be chip cards."

Mr. Linkens and Proton, with deep-pocketed backers and several years of development under their belts, are clear leaders in the European card community. They strutted their stuff last month at the Cartes '99 exposition in Paris, demonstrating, among other things, on-line cash loads and purchases denominated in both euros and dollars and linked with two competing systems, Visa and Europay International.

With the card manufacturer Gemplus, Proton won one of the Cartes '99 Sesame awards for an electronic purse complying with CEPS - the Common Electronic Purse Specifications, which have been strongly supported by Visa, Proton, and MasterCard's Europay affiliate.

Whether this kind of recognition can carry over to the resistant U.S. market, presumably with help from Visa and American Express, remains to be seen. But Mr. Linkens has patiently been staying the course since he took on the Proton assignment almost five years ago. He has faith that reason will prevail both about what he is selling and about the need for agreement on interoperability among electronic cash schemes. On this point, CEPS advocates say the Mondex venture, controlled by MasterCard International, has not sufficiently acquiesced.

"Everybody is talking about Internet payments," Mr. Linkens said. "It works today within Belgium, but it doesn't work in an open world. We need interoperable systems, and that is why Proton decided that CEPS is a priority."

Mondex and some others that have licensed its Multos multiple-application operating system do not share the CEPS camp's insistence that all small-value purse transactions be centrally accounted for. To Mondex it is a matter of economics, but to Mr. Linkens, unaccounted systems are vulnerable to fraud, money laundering, and other costly "commercial problems."

"I think the Mondex model still has a few years to go before it will fly," he said. He suggested that Mondex develop an "audited-system strategy alongside the unaudited" to give its members choice and allow for CEPS compatibility.

He said Multos, which includes American Express among its licensees and users, is "several times more credible" than the Mondex approach to electronic purse. Yet Maosco Ltd., the Multos governing consortium, has not embraced another Visa- and Proton-supported standards-setting venture, GlobalPlatform Inc. This leads Mr. Linkens to question whether Multos can hold up alongside two key GlobalPlatform entrants, Microsoft Corp. with its Windows for Smart Cards operating system, and Sun Microsystems Inc.'s Java Card specification.

"I would advocate that Multos get into the infrastructure lane that the market has taken," Mr. Linkens said.

Such debates are still distant thunder from a U.S. perspective.

"People in the United States still have the image of chip cards 10 years ago - they were barely reliable, unaffordable, and had no function whatsoever. They have a mindset based on memory cards, but I have four 8088s in my pocket," Mr. Linkens said, referring to the microcomputing power that current-generation cards can carry.

Like many European observers, Mr. Linkens wonders why Americans find it so complicated. Aware of several U.S. efforts to accommodate debit cards on the Net, he said, "The only solution is a chip on the card" that securely processes personal identification codes or digital certificates.

Quoting Marc Lassus, chairman of Gemplus Group, Mr. Linkens said the computing power on chips in smart cards worldwide will soon exceed that on the entire "installed base" of personal computers. With the economics of chips inexorably improving - Mr. Linkens sees $10 per card at the "high end" and elementary multi-application alternatives as low as $3 - and with powerhouses like Microsoft promoting the technology, U.S. bankers should come to accept that they are part of a "much bigger picture," he said.

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